Innovation Authority set to bring pharma cos to Israel

Two major pharmaceuticals firms will set up development centers in Israel as part of the Innovation Authority's Track 35 program.

When the Office of the Chief Scientist in the Ministry of Economy and Industry became the Israel Innovation Authority in 2015, an independent agency answering to the Ministry of Economy and Industry, the explanation for the measure was that plans could now be drawn up for supporting Israeli technology companies more quickly and with less bureaucracy. To be more specific, the change was designed to facilitate tailoring special plans aimed at bringing international companies to do business in Israel. Beyond that, the dream was to recruit major pharma companies to reinvigorate the Israeli drug and diagnosis industry.

Since the Innovation Authority got underway, a dizzying abundance of plans has been launched, and international drug company Lonza founded a branch in Israel. The really big fish, however, a drug company opening a large development center here like that of IBM or Intel, has not yet been netted, in contrast to medical device companies, which have been operating here for decades.

In preparation for next week's MIXiii Biomed 2018 Conference in Tel Aviv, Innovation Authority CEO Aharon Aharon spoke about his vision for the biomed industry and the difficulties in achieving it. "In high tech and software, the main problem is a lack of employees. In biomed, the main problem is a lack of suitable jobs for talented people and relatively low productivity in the existing jobs, reflected in the salaries," he says. "The human capital, on the other hand, is excellent, the medical research at the universities and hospitals is superb, and the interface between higher education, hospitals, and industry is getting better."

Waiting to net the big companies

One of the painful topics is the absence of major drug companies in Israel. Most of them have established branches for selling to the Israeli market, but not development centers like the ones in communications and software, and even in medical devices. It is believed that such activity could give the sector a significant boost, as it has done for the Israeli high-tech sector on a large scale.

"Track 35," an attractive track for convincing large companies to establish Israeli development centers, has been established for this purpose. The tender has already taken place and the results will be announced in the summer. Two anchor companies will probably be selected in the first stage, and Aharon says that "very worthwhile" companies took part in the tender. Beyond this project, the Innovation Authority is amenable to tailoring specific programs for each interested company.

"There are more companies interested in coming to Israel with far more extensive activity at the moment," he declares. "I'm talking to dozens of companies in addition to those who took part in the tender, and what interests them the most right now is our data." Israeli medical data is attractive because it is genetically diverse (as befits a country of immigrants), well organized (because we have only four health funds and every person has a life-long ID card), mostly computerized, and well documented from the beginning by doctors with Western training.

The government is therefore planning to offer Israeli information as a kind of bait for hooking foreign companies. This information will not be offered to the highest bidder; preference will be given to those who will use it as part of their activity in Israel. A NIS 1 billion government program for gathering and improving Israeli medical information and providing incentives for research in it was announced a month ago, and the Innovation Authority is part of it.

The most interesting information will probably be what is accumulated in the Mosaic program for genomic mapping of the Israeli population. 100,000 volunteers will participate in the program. The project's advisory council will determine their composition: how many patients with rare diseases, how many patients with common diseases, and how many healthy people; how many young people and how many older people; the proportion of representation for people of various origins (Ashkenazi Jews may be underrepresented, because there is already a great deal of information about them from US medicine); etc.

The volunteers will contribute genetic testing and access to their medical records to the database. The information will be made anonymous, meaning that the connection between it and the associated ID numbers will be severed. Ethical discussions are currently taking place on questions such as what should be done if genetic information is discovered in a sample capable of affecting the volunteer's health. Aharon says that a great deal of money will also be invested in privacy.

Facilitating clinical trials

One question arising from the database is what authorization should be obtained in order to investigate it, and whether this will be considered a clinical trial. This issue was also discussed in the framework of efforts at a general reform in clinical trials in Israel. Aharon remarks, "It will be at least as easy as getting authorization to inject something into a person." Today, getting permission for research that includes genetic mapping requires an application to a central ethics committee, while a trial that does not include genetic information can be approved at the hospital level. "When you go to the high committee, it becomes a problem," Aharon says. Legislation to address the matter is under consideration.

According to Aharon, financing advanced trials is one of the major problems today. Drugs developed in Israel or by Israelis overseas are very successful worldwide, with sales in the billions of dollars, but mostly by foreign companies. "Why are we missing out on these companies? When is the information leaving Israel? At the beginning, when the risk is at its highest, we pay for 70-80% of it. When the risk falls, although it is still high, the amount of money required is enormous, and we can't finance it. The options that these companies have are the venture capital funds, private capital, or a stock exchange, usually a foreign one. These concerns often pressure the company to transfer its activity," says Aharon.

The state-guaranteed loans program is designed to address this problem. This program is currently funded by a program in the framework of Horizon 2020, a European program, or by a European development bank (BiondVax Pharmaceuticals Ltd. (TASE:BNDX), which is developing influenza vaccines, reported that it had received such a grant). The plan is for Israeli banks to join the lenders in the future, with other programs being designed to make it possible to take a bigger risk.

"The need for grants in the biomed industry alone is several times as much as the Innovation Authority's budget," Aharon complains. " We can give lenders risk-reducing grants up to a certain level, so that the total amount of the loan can even be as much as NIS 50 million. We hope to establish as many such programs as possible."

Innovation Authority growth division acting director Sagi Dagan says, "The loans are especially relevant for companies that have to complete a specific stage likely to boost their value, or for which an external financing round at a certain point can greatly damage their growth capability. A concern that provides 10 such loans can spread the risk."

Companies that receive grants sometimes use them to set up plants for making the products for their clinical trials, even before they know whether the trials will be successful. This happened in the cases of Pluristem Therapeutics Ltd. (Nasdaq:PSTI; DAX: PJT: PLTR) and VBL Therapeutics(Nasdaq:VBLX), which are waiting for approval. Aharon: "These are topnotch plants with nothing comparable in the world; there will always be a use for such a plant, even if the company is acquired, or, God forbid, closes down. These are the kinds of developments we have dreamed about."

"A tool that can take the industry to another level"

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One of the liveliest segments in the life sciences field in the Innovation Authority is applied research, which includes programs like the MAGNET incentive program (Generic Pre-Competitive Technological R&D), which combines companies operating together, sometimes with groups from higher education, in order to create knowledge of use to all of them; the MAGNETON incentive program of cooperation between a higher education concern and an industrial concern; and the KAMIN program for promoting applied research in higher education.

There are several examples of successful MAGNET consortiums. One of them is in brain research, in which a method of linking brain stimulation and its measurement was developed. Other examples are a consortium that solved a fundamental problem in drug delivery and a consortium for 3D printing of tissue. 100 representatives of companies from various sectors attended the latter consortium's launching event.

Aharon: "We regard MAGNET as a tool that can take the entire industry to another level. For example, a cyber consortium was one of the factors that pushed the cyber field forward and made it one of the areas in which Israel stands out and has a competitive advantage." Of course, not everything happened because of the MAGNET program. The selection of cyber as a national priority and the allocation of government resources and money to it had an effect, but the program definitely helped.

Another activity designed to provide infrastructure for young companies is taking place in the framework of innovation laboratories. Five franchise holders were selected to operate these laboratories, in which startups are operating in close cooperation with a veteran company. This activity is not confined to the life sciences, but is well suited to it.

"The reasoning goes like this," Aharon explains. "Many companies have no access to infrastructure, while infrastructure has no access to startups, so if we take companies like German Merck or Frutarom, which allow startups to use their infrastructure, or which build new infrastructure for the project, we help them with financing. The startup doesn't have to build infrastructure, and we don't build the infrastructure for it. An expert in infrastructure of this type builds it. This also generates familiarity between the large companies and the startups." After the franchise holders were selected, some of the participants in the tender that were not selected founded such activity at their own expense because they liked the model, Aharon says. The winners in the tender will be announced in July-October.

Is it right to also build shared infrastructure for biomed companies outside of this project? Aharon admits that the Innovation Authority has not yet decided this question. The Innovation Authority is allocating capital to companies interested in buying infrastructure equipment they would otherwise be unable to afford, but what has yet to be decided here is something bigger. "Once upon a time, for example, there was no plant in Israel manufacturing biological drugs, and a group of young companies got together and asked use to help them build one jointly. It eventually did not go through, but this is the scale of the infrastructure activities we're considering," he says.